IAIN Duncan Smith has launched a scathing attack on George Osborne, likening the Chancellor to Pinocchio over his warnings that house prices would take a hit if Britain leaves the EU.

Mr Osborne said a report on the short-term impact of Brexit, due for publication next week, will forecast people's homes will lose between 10 and 18 per cent of their value by 2018 if Britain votes Leave in the June 23 referendum, compared to what they would be worth if the UK remains a member of the EU.

With the average UK home costing £292,000 and the Office for Budget Responsibility predicting rises of 9.4 per cent over the next two years, this would be the equivalent of depressing the value of a typical residential property by £32,000-£57,500 by the middle of 2018 - with much higher losses for more expensive homes.

But Mr Duncan Smith said the Treasury had failed to spot the recession and its forecasts were often wrong.

The former Work and Pensions Secretary said: "When I heard that I did think of Pinocchio and the nose growing rather long here.

"Let me just remind everybody that it was the Treasury and George Osborne who said when we came into power in 2010 we couldn't trust Treasury reports because they were always fiddled with by Chancellors of the Exchequer.

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"That affects the value of people's homes and the Treasury analysis shows that there would be a hit to the value of people's homes by at least 10% and up to 18%.

"And at the same time first-time buyers are hit because mortgage rates go up, and mortgages become more difficult to get. So it's a lose-lose situation.

"We all want affordable homes, and the way you get affordable homes is by building more houses. You don't get affordable homes by wrecking the British economy. And, of course, if we left the EU, mortgage rates would go up, it would become more difficult to get mortgages so they'd be hit as well."

But the increasingly dramatic nature of the claims on both sides of the referendum debate shows the campaigns are treating voters like "simpletons", according to one of David Cameron's former advisers.

Writing on the Medium website, Steve Hilton said: "Right now you see this played out in the EU referendum campaigns, with their outlandish claims of dire outcomes, whether it's invoking world war if we leave, or Hitler if we stay. Both campaigns, frankly, are treating people like simpletons."